The Analysis of Contributions on the Housing Bubbles

Abstract

In the past twenty years, the study of monetary policy and estate has become an essential component of the field of macroeconomics. The chief object of this paper examines that the loose monetary policy is not the main factor leading to the housing bubbles. With the internet bubbles bursting in the early 2000s, there was a destabilizing effect on the stock market and an increase in interest rates, causing the prices of housing to become higher. Some economists present that monetary policy plays a central role in housing bubbles but the findings in this paper would provide controversial views by analyzing the relationship between real macroeconomics in the 2000s in the U.S. and the monetary policy rule, such as Taylor Rule, Phillips Curve, Fisher Equation and the trend of aggregate demand. The change in the nominal interest rate would be higher than that in the inflation rate and real interest rate. The adjustment of monetary policy according to macroeconomics, including the unemployment rate and the extent of deflation. As a result, loose monetary policy is not the main reason for the housing bubbles.